We the Cared For

Fannie Mae and Freddie Mac; the Federalization of the Mortgage Business

The Federalization of the mortgage and housing industry is front and center in public awareness as of Thursday. I talked about this just last week in the “Credit Crisis and the Rush to Government Bailout”. This has been happening in a series of ways for the past year as the crisis began and is now reaching zenith. The Government Sponsored Enterprises, Fannie Mae and Freddie Mac are “quasi” governmental entities and their failure has always been presumed, and as you will see as time progresses, not allowed to fail as government intervenes to support them.

The GSEs

No serious discussion about the mortgage industry can leave out the most powerful players in the markets development and ongoing operations. These organizations (GSEs) securitize and/or guarantee and hold mortgage loans in the Trillions of dollars.

There are three primary mortgage related entities with direct or indirect ties to the government. They are the government owned Government National Mortgage Association (Ginnie Mae), and the Government Sponsored Enterprises which include Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

Ginnie Mae is directly owned by the government and their mortgage securities are the only securities explicitly backed by the full faith and credit of the U.S. Government. They are the issuer of all types of mortgage loans however are the only issuer of loans insured by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), the Federal Housing Administration (FHA) and the Office of Public and Indian Housing (PIH) and loans made by the U.S. Department of Agriculture (USDA) Rural Development Housing and Community Facilities Programs.

The difference between Ginnie Mae and Fannie and Freddie (created in 1970) is that Ginnie Mae is owned and operated by the U.S. Government within the Department of Housing and Urban Development (HUD), while Fannie and Freddie are private, shareholder owned corporations that are not directly (explicitly) supported or funded by the U.S. government.

Throughout history and as current market conditions show this is a distinction without a difference. It is clearly implied that Fannie and Freddie are backed by the government.

The GSE entities are regulated by the Office of Federal Housing Enterprise Oversight (OFHEO). The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 created this regulatory oversight to address the GSEs safety and soundness which is managed by OFHEO. It also established oversight to be sure the GSEs adhere to their affordable housing requirements which is monitored by the U.S. Department of Housing and Urban Development (HUD).

To give you an idea of the influence these entities have on the mortgage market note the size of the mortgage debt outstanding estimated by the Federal Reserve at $11.9 trillion by the end of 2007. Fannie and Freddie Macs residential mortgage debt held in portfolio or securitized reached $4.9 trillion or 41.4% of the total market by year end 2007.

The GSEs’ shares are increasing as of this writing due to the fact that the secondary market has seized up to the point that more loans are being directed to government backed programs where the liquidity still exists. Total mortgage originations (dollar volume of purchased loans) market share grew from 37.4% in 2006 to 75.6% in the fourth quarter of 2007 (OFHEO Report to Congress 2008, 2008).

These companies have been embroiled in an accounting scandal, investigations of their top officers. Fannie Mae is currently under a consent agreement (ordered to take various actions) and Freddie Mac is under a voluntary agreement to fix risk management, process problems and controls. 

“For the first time in four years, the Enterprises filed their annual financial statements on a timely basis. Significant progress was made in the remediation process, but OFHEO concludes that both companies remain classified as significant supervisory concerns. The primary reason for this classification has changed from previous years. The extraordinary declines in the housing and mortgage markets have greatly increased their credit and interest rate risks, which have put additional pressure on their credit management, interest-rate risk management and financial modeling processes. As you will read in this report, they have made reasonable progress in these areas as well as in governance, internal controls, systems, and operational risk management; still, they both, to a varying extent, have significant further work to finalize their remediation efforts and test those improvements(OFHEO, 2008).”

The GSEs are providing a much needed stabilizing force in the mortgage market through this crisis as was the intent of their charter to begin with. But to continue to say the government guarantee is implicit rather than explicit because it is not written that way is now proven disingenuous. The American tax payer is subsidizing these entities, according to Congressional Budget Office (CBO) study in May of 1996 then to the tune of $6.5 billion in 1995, and is certainly responsible as the lender of last resort to these massive institutions.

With the current credit crisis in full swing we have suddenly lifted the GSEs out of their supervisory arrangements, lowered their capital requirements, and loosened underwriting criteria. Congress can do this again because, again, the taxpayer is behind them shouldering the risks. The interesting thing to watch will be private industries rush to pull it all back when the market normalizes as it surely will to increase their profits. In the meantime the GSEs will have captured most of the market, taken on significant risks, and have a completely different, worsening, risk profile.

So as of today the Fed and the U.S. Treasury Department are looking for ways to prop up these entities. Conversations include opening up the Fed Discount window which is the mechanism that has allowed banks and non-banks to borrow longer term funds using riskier collateral from the Fed. The other option being discussed is the outright purchase of the GSEs debt by the Fed. Each of these options, and frankly any others, will be shifting billions of dollars of risk to U.S. Taxpayer.

With mortgage insurance companies like PMI trying to stay oxygenated with the triad of pressure from skyrocketing insurance claims, continually lowered credit ratings and thus higher capital costs (if they can even access capital with their lower ratings) and reduced revenues because of all of these, the government owned and operated FHA will be the only viable mortgage insurance program left.

Why?

Because its government owned and will be subsidized by U.S. taxpayers as losses begin to exceed claim paying capability.

The American taxpayer has been pulled into supporting trillions of dollars of high risk mortgages now and in the future.

Do you think that’s ok? Do you think they should be allowed to stand on their own or fail on their own? Do you see any alternatives to these problems?

I look forward to any comments or suggestions you might have.

The Credit Crisis and the Rush to Government Bailout

The current credit crisis and its impacts on our economy and economies across the globe are now evident. The easy money period between 2001 and 2006 poured trillions of dollars of profits into financial services market participants and individuals alike. Trying to place singular blame in this situation is like trying to pin the tail on a herd of donkeys. Banks, mortgage banking companies, Wall Street invest banks, credit rating agencies, regulators, home builders and developers, the Federal Reserve and investors seeking to maximize their returns all share in this problem in one way or another.

Let me start by saying that I am an ardent believer in free market capitalism… period. I am also in full support and a cheerleader for individuals and companies alike to make as much money as possible by providing value and innovation to the customers and markets they serve. The conversations about CEO salary caps and the like smack of socialism at best and communism at worst and have no place in our markets or society.

I also believe that the fundamental right of individuals of age to contract and make decisions for themselves is at the very heart of our freedom and prosperity.  Sometimes people are rewarded by their decisions and sometimes they are penalized for them but at the end of the day, if the transactions are entered into legally, morally and ethically by both parties the gain or the loss is the individuals to bare.

Privatizing Profits and Socializing Losses

What I do have a problem with is that these same individuals and all of these companies, having reaped all of the rewards from their activities and having all of the potential upside, are all now looking to the Government and to the tax payers to bail them out when their decisions have led to bad outcomes and even catastrophe. This event is not an “Act of God” as may be prescribed to Hurricane Katrina requiring public assistance. These are the results of millions of individual choices made by responsible adults of contracting age and private businesses.

These companies and the people managing them reaped billions of dollars in profits and compensation. Individuals made billions of dollars investing in mortgage bonds, buying homes, flipping homes and extracting the equity.

Now that it’s all gone bad what’s the solution?

The solution is a taxpayer bailout of massive proportions through the federalization of the mortgage and credit markets. The expanded use of the Federal Reserve, Fannie Mae, Freddie Mac FHA and just the outright handout of tax breaks and U.S. Treasury cash have put the substantial future risks and current losses right at the feet of the American citizen.

This privatizing of profits and socializing of losses shakes the very foundation of our professed beliefs and the very real workings of our markets in freedom of choice and free markets.

It stretches the imagination that if you go out and make a bad decision on a car purchase and lose money, make a stock investment that goes bad and lose money, or buy a lottery ticket and don’t win or gamble away thousands of dollars in Las Vegas, that these losses are and should be individual choices and outcomes but it’s somehow different because an individual bought a house. In the majority people not only buy a house for safety, security and that “feeling” that comes with homeownership but in the hopes of appreciation on a large investment.

If mortgage delinquencies and foreclosures spiked to 20% of the mortgage borrowing population 80% of this entire population of homeowners are paying their mortgages on time regardless of what is happening to the value of their home. If we’re handing out money why are we handing it out to the people that made the wrong decisions and not giving it away equally to “homeowners” en masse?

There are not many successful incentive programs built around rewarding the bad decision makers vs. the good decision makers that I am aware of. In fact if the incentive takes the risk out of future decisions then I will take more risks if I know someone will subsidize my loss. There is a severe lack of common sense, fair-play, balance and ethics at play here.

Don’t get me wrong. I feel badly for every borrower involved that has been hurt by this just as I do for people when the stock market drops and so many people lose so much money. I also believe that people that were fraudulently induced into their situation should have remedy, which they do in the courts, not through government. 

Think of it this way… it would have been better at this point to have had a nationalized housing program that would take billions of dollars of taxpayer money and buy the houses outright for people that the government thinks are worthy but really can’t afford it.

People have a fundamental problem with significant, programmatic income redistribution like that when it’s “in your face” but don’t see it framed the same way in the disjointed, confusing web of “solutions” that have already been enacted with much more on the way. It is however, exactly the same.

Congress is at the very heart of this interference and manipulation. In their rush to appease and support major corporations and investors (contributors all), shrill customer advocate groups and some small segment of voters, they pile over one another to pour billions of hard earned tax dollars at the problem like so much oil on the squeaky wheel. They defer to experts at the Fed and others letting them make decisions that clearly stretch the boundaries of, or are just outright beyond the boundaries of their charters. The Fed jumps in with even more zeal and fewer restraints to “save the financial system from collapse” putting its protective, tax payer blanket over their constituents.

These are the same "experts" that helped create the problem in the first place. These are, for the most part, good people with good intentions, all with competing constituent interests, making cumulative bad decisions that put a cancer causing salve on a wound to stop the immediate bleeding today. The tumors are going to be popping up in places and at times that will be totally unexpected and will have to be dealt with more severity and more public money, in the future.

The Fed and the U.S. Treasury are playing the same game of chicken the originators were back in 2006 only with much more power, more sophisticated tools and controls and doing it with tax payer, not private money.

It goes something like this… If the government shifts the burden of risk to itself the credit markets will regain confidence, liquidity will return (the money will flow), the markets will “normalize”, the risky assets we’re now backing with tax payer dollars will come back to a higher value and voila; we’ve avoided the pain. Sound familiar?

There seems to be this consensus that the failure of many of these major banks would collapse the entire financial system here and around the world.

I find this difficult to imagine with the Trillions of dollars of capital flowing through global markets everyday and many financial institutions (i.e., Wells Fargo, J.P. Morgan and Bank of America) on solid footing because they made better decisions during the boom period in balancing their risks.

The other glaringly obvious argument against this is the ability for bank and non-bank financial institutions to re-capitalize (get more money) even in light of the severity of their problems. Investors foreign and domestic are looking for opportunities to own in the upside of these now troubled companies and have invested billions to shore them up for that chance. Sure it’s at a fire sale price, certainly it’s painful, and yes there will be companies that can’t find enough money or find it in time and go out of business. And yes, it will put a strain on the financial system. That’s the definition of free market capitalism.

Bailing everyone out from start to finish in this thing has not only shifted the private losses to tax-payers but sent a huge signal to future actors that the ultimate downside risk isn’t so ultimately bad after all.

We might as well create a new national corporate and banking “Federal Lost Investment Insurance Program” we’ll call “FLIP” that is the bigger brother to the FDIC deposit insurance plan. The FDIC plan insures depositors their money back for up to $100,000, if one of their insured banks fail. The new FLIP program is the Federal Reserve and Congressional guarantee that if the investment losses are big enough and bad enough then these “too-big-to-fail” players will be guaranteed and saved by the Federal government.

Being FLIP – The New “FLIP” Program

The model for the FLIP program is a little different however; the FDIC actually collects insurance premiums from the banks whose deposits it insures. FLIP wouldn’t have to involve itself in pesky matters like that because ultimately the premiums to “flip” losses onto tax payers backs are already collected by the IRS.

The mortgage and housing markets have been transformed over time from a fairly simple business of bank balance sheet borrowing and lending to a highly sophisticated and complex web of instruments, market participants and global interactions.

As in so many areas of society, the speed of technological innovation has exceeded our ability to control these dynamic forces. While allowing wonderful and beneficial innovation it also brings a false sense of security to its users and rather than migrating in our experience and waiting for historical results, we fly full speed ahead with our models like so many unproven test aircraft as if they were already proven ready for fleet deployment.

These innovations have been extremely beneficial to borrowers and market participants alike providing more access to more capital. The massive amounts of money that flow through this system and the profits for individuals and companies alike are astounding  and everyone would like to participate and wants as much, as fast as they can get it. This is as it should be.

The issue is not that we won’t have problems. This won’t be the last asset bubble that collapses leaving a path of destruction in its wake. It is the price for pioneering and moving forward. The issue is how we learn from what happened and improve our ability to balance controls and free markets in as close to the right formula as possible.

One thing is for sure, if we allow individuals and companies the freedom to make their own financial decisions they should be left with consequences of those decisions, good or bad, or they, and we, would have learned nothing or certainly far less than we should.

It should be clear how there is a direct link from the tax payer wallets to their pockets now that things have gone bad. It is as if billions of dollars in salaries, bonuses, profits and borrower gains were made privately and now that these same players are having trouble and we can’t ask them for the money back to pay for this mess, we will give them more and save them with tax payer dollars.

This troubling mix of government and public policy integrated with private practice and wealth creation makes for bad bed fellows. The Federal Reserve is a real influence over these events, creating them and trying to fix them, and does a poor job of both.

Our policy makers use the “potential failure of the banking system” as a reason to prop up private interests and to throw billions of dollars at the problem. Some with very real and calculable ramifications, but the majority of them will bring incalculable impacts and distortions that will only be evident over time.

The bottom line is that if we are going to allow private profits, then private interests should be allowed to fail. If this notion of private interests being so intertwined with the failure of our financial system is as real as they would have us believe i.e. Bear Stearns and all of the counterparty risk, then we have no more significant public policy issue than unwinding theses financial entanglements with maximum speed and getting on with business. This is what Congress should spend its emergency time on and not figuring out how fast they can hand out money.

If this truth is supposed to self evident, that we believe the public must prop up private interest, then let’s quit acting as if we have a free market economy and start socializing profits and put government controls over these sectors since we are already responsible for the losses.

It just feels more honest to me that way.

Fear and Freedom

“They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety.”

Benjamin Franklin

What will fear make you do?

If I can induce fear in you, I can get you to react.
If I can get you to react more, you will think less.
If I can get you to think less, then I can gain control of you.
If I can get more control of you, you become weaker.
If you become weaker, you look to me for protection.
If you look to me for protection, you will do what I tell you.
If you do what I tell you out of fear, you have lost your courage.
If you have lost your courage, you will lose your freedom.

The 4th Amendment

“The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”

Through fear we have lost the courage to fight to keep our hard won, constitutionally protected freedoms and have given up control to those who make us afraid.

In our fear, we have forgotten what it means to be brave and fight for our rights like so many brave people who came before us.

Imagine if our Founders had been so fearful of British power that they failed to act as “traitors to the crown”. Imagine that these men, fearing for their very lives, conformed to the “tyrannies” of the British government. Imagine that they had not lived, seen and learned about the eventual abuses of government power and created a system of government with checks and balances meant to preserve the Constitution.

Too frequently we fail to realize the personal liberties we have let slip through our fingers, and continue to surrender, as our fear consumes our sense of right and wrong.

The latest Warrantless Wiretapping legislation moving through Congress in H.R. 6304 “to amend the Foreign Intelligence Surveillance Act of 1978 to establish a procedure for authorizing certain acquisitions of foreign intelligence, and for other purposes” at the behest of the administration  is just such a “tyranny”.  And we the people sit idly by as another hole is being punched through the Constitution and our fundamental rights to privacy because we are afraid.

We are told we should be afraid because of 9/11 and even more fearful because of all the things that we don’t know that go on in secret and behind the scenes known only to our “protectors”.

Our protectors tell us that the reason we haven’t had another terrorist attack is directly related to the freedom we have relinquished. According to those in power, they can only protect us by further limiting our freedom.

Eight years passed between the 1st bombing of the World Trade Center and the horrid events of 9/11/2001. These 8 years passed without the permanent, wanton destruction of our rights in the name of security.

What makes anyone think that this 7 year pause is related to the unconstitutional powers we keep handing over? Even if it were some small part of the reason can we not expect our protectors to defend our rights as vigorously as they defend our country?

What is it we are protecting anyway? We are defending our physical beings as well as our way of life. So many patriots of our country have given their physical lives to defend our way of life, as defined and protected by the Bill of Rights and our Constitution, that it’s evisceration should be a clear sign that we need new “protectors”.

Today instead of protecting these hard won freedoms through civil discourse and the political process, we have let our fear overcomes our senses.

I struggle to think of an extended period of time when our country hasn’t had reason to be afraid. The fears of the people during the Revolutionary War, the Civil War, World War I, World War II, the Korean War, Vietnam, the Cold War and nuclear proliferation and now the War on Terror.

We let our fear after the attack on Pearl Harbor strip some 120,000 Japanese people of their freedoms and not one, not ONE of these people was ever convicted of spying or sabotage. The McCarthy hearings and our fear of communism ruined more than few innocent citizens good names. But apparently, it’s ok to break our laws in these situations because we allow our protectors to wield unlawful power so that they make us less fearful. 

In our fear this time around, the administration has seized the moment to take illegal powers into the Executive Branch. We find ourselves condoning the use of torture with arguments harkening back to former President Clintons arguments about his definition of “sexual relations”, arresting people without charges, detaining people for years as “enemy combatants” without redress, housing people in secret CIA prisons, and allowing our protectors to illegally invade the privacy of our own citizens.

Between the War on Terror and the Drug War (include the very real war on social drinking in our race to Prohibition), we have let the purveyors of fear strip away our rights to privacy, property and to be secure in our persons at an alarming pace.

If we will give up these lawful rights, what won’t we give up to “be not afraid”?

The very real fear should be that we are losing our courage to defend our personal freedoms while at the same time defending our nation.

Feducation

In a Presidential election year it is disappointing to listen to the benign rhetoric that plagues what should be serious discussions about the actual policy solutions needed to improve our nation. Missing in action are the serious, meaningful discussions about the very real actions that are required to address our ability to improve economic conditions, meet societal objectives and promote liberty and freedom in America.

The equation itself is quite simple. Since President Roosevelt’s “New Deal”, we have continued to increase the size and scope of the federal government. As we hand off more responsibility and accountability for our lives to the federal government, they take more in tax and excise revenues. As they control the redistribution of everyone’s money, they put rules and regulations around the handouts of hundreds of billions of dollars furthering their stifling reach into the daily lives of every American.

For examples of the expanding control and reach, one has to look no farther than public education and funding, the control of speed limits, funding for streets and highways, what farmers grow and don’t grow, alcohol and BAC limits, grants for road construction and repair, pre-school programs, what you can and can’t produce, and on infinitum. It is a list so long that I will take the example of education to make the point, but it is the same for so many aspects of our “free lives”.

We have turned into a nation of people that turns its collective heads naturally to the Federal Government on every issue. The difficulty is that the government has reached so broadly into the fabric of controlling and redistributing money that everyone represents a “constituency” in some form or fashion. Taking this largesse from one constituency not only raises cries of “societal damage” from the special interest affected, but seems to parlay into a feeling that if we let them gore the other guys ox, my ox could be next.

Lets’ start with total government spending which is reaching stellar proportions and move on to education as the example.

You will find yourself easily handled by all of the spin doctors (our government representatives and not-so-special interests) on this one because the conversation always comes back to "the Big 3"; National defense, Social Security, and Medicare and Health. The Big 3 represent approximately 65% of federal spending or “outlays”.  So the spin goes, "if we don’t address the Big 3, we can’t have a meaningful impact on the budget."

Well of course we can address the Big 3 and as just one example, we had better do something about Social Security which is roughly equal to our spending on defense at 21%. Tail end baby boomers will be getting a nickel for every dollar we’ve handed over and the generations after that will have nothing. Talk about gored oxes.

In their sales pitch and closely followed by supporters of this spending, they will use the comparison of the overall Federal budget as a percent of U.S. GDP claiming that while it has been at highs and not so lows, it still fairly stable over the years. This is a red herring. The government isn’t supposed to "produce" anything. Every dollar taken from individuals and private enterprise is one less dollar that can be put to productive use. The federal government should be shrinking as a percentage of production, but hey that’s another one of those "inconvenient truths".

The point is this, the Big 3 represent 65% of $3 TRILLION per year in government spending (Federal spending here only; add your state and local governments spending to this pot of gold). If we add defense spending at an additional 21%, let’s call 86% untouchable because “we the people” won’t get to make difficult decisions regarding social programs that aren’t even authorized by the constitution.

That leaves a mere $435 BILLION per year that needs to be sitting under the carving knife.

This is the second way the spin goes in. All this talk about trillions and billions of dollars when it’s related to our government goes in one collective ear and out the other. “Billions” when related to the government has become just like the deduction out of your payroll check for taxes. You don’t feel like the money is yours and you’re conditioned to the fact its "deducted" every month, so you barely bat an eye. I listen to people every year at tax time who are thrilled to be getting a “tax-refund” as if they weren’t the ones who earned the money being "refunded" in the first place. People should be made to write a check for the amount of their money confiscated every month to bring back awareness these issues.

This is conditioning and of a very dangerous sort. This is money taken from the hard work of our people to be handed out by the federal government. To get an idea of how much money this is, let’s take a look a few things $435 billion might get you…

• 435,000 millionaires per year
• 1,916,430 new houses at the national average home price per year
• 21,751,485 new cars at an average price of $20,000 per year
• 14,325,738 4-year tuitions at a private college per year
• 108,757,425,000 gallons of gas at $4 a gallon per year

It is an astounding amount of money, yet it rolls right through the nations collective minds in some sort of "well its ok if it’s put to good use" mind set. The best use of the money is to leave it with the people that worked hard to earn it.

So let’s get back to our example regarding the expanding control of the government …

The Department of Education (ED)

I choose this as an example, but frankly you can pick from the laundry list Federal agencies which can be found here Federal Agencies. I will forewarn readers to set aside some time to page through this list since it is a very long and disappointing display of overreaching.

To begin with the Department of Education is not constitutionally authorized. There is not one single reference to the word “education” in the constitution. The actual words that are supposed to constitute the law for our country are clear in both the 9th and 10th Amendments.

Specifically the 10th Amendment states:

"The powers not delegated to the United State by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

Clearly the Federal government is not authorized to be involved in public education and it is left to the dictum of the states and the people.

On October 17, 1979 President Jimmy Carter and congress passed the unconstitutional creation of the "Department of Education Organization Act" creating this cabinet level department which began operations in May of 1980 and now controls the handing out of $68 BILLION a year.

In the Department of Educations own words (emphasis and underlining added by me)...

"ED currently administers a budget of $68.6 billion per year—$59.2 billion in discretionary appropriations and $9.4 billion in mandatory appropriations—and operates programs that touch on every area and level of education. The Department's elementary and secondary programs annually serve more than 14,000 school districts and approximately 56 million students attending some 97,000 public schools and 28,000 private schools. Department programs also provide grant, loan, and work-study assistance to about 11 million postsecondary students.

That said, it is important to point out that education in America is primarily a State and local responsibility, and ED's budget is only a small part of both total national education spending and the overall Federal budget, as we explain in a primer on the Federal role in education. In addition to this historical background, we try to demystify the Federal budget process and show how it is carried out in ED. "

Trying to make the case that the department is a small part of the nation’s overall spending is quite disingenuous when they have no business redistributing federal tax dollars for education in the first place. These distributions come with all sorts of strings attached and have our local schools and other entities teaching to the test and allocating significant resources to learn how to apply and get their hands in the trough. California, New York, and Texas each received over a billion dollars in department "grants" in 2007 with Florida, Illinois and Pennsylvania hot on their heels at over half a billion each. Since all we hear about is constantly strained school budgets, you can bet everyone is working hard to "comply" with what the federal government thinks is right to get their share of the pot no matter what it takes.

What are we getting for this illegal departments help in influencing state and local policy with federal tax dollars? Happier special interest groups but certainly not performance (again emphasis added by me…

"Highlights from PISA 2006: Performance of U.S. 15-Year-Old Students in Science and Mathematics Literacy in an International Context"

"Description: This report summarizes the performance of U.S. students on the Program for International Student Assessment (PISA), comparing the scores of U.S. 15-year-old students in science and mathematics literacy to the scores of their peers internationally in 2006. PISA, first implemented in 2000, is sponsored by the Organization for Economic Cooperation and Development (OECD), an intergovernmental agency of 30 member countries. In 2006, fifty-seven jurisdictions participated in PISA, including 30 OECD jurisdictions and 27 non-OECD jurisdictions. The results show the average combined science literacy scale score for U.S. students to be lower than the OECD average. U.S. students scored lower on science literacy than their peers in 16 of the other 29 OECD jurisdictions and 6 of the 27 non-OECD jurisdictions. Twenty-two jurisdictions (5 OECD jurisdictions and 17 non-OECD jurisdictions) reported lower scores compared to the United States in science literacy. On the mathematics literacy scale, U.S. students scored lower than the OECD average. Thirty-one jurisdictions (23 OECD jurisdictions and 8 non-OECD jurisdictions) scored higher on average, than the United States in mathematics literacy in 2006. In contrast, 20 jurisdictions (4 OECD jurisdictions and 16 non-OECD jurisdictions) scored lower than the United States in mathematics literacy in 2006."
 
You can go to for a list of over 88 programs that the Department of Education has their tentacles in.

We need to get off the raise/lower tax conversation and on to the cut expenses and the size and scope of federal government to its constitutionally authorized duties only. The tax savings will become obvious.